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Cobalt is one of the few metals used for superalloys.

Nearly 20% of all cobalt is used for superalloys – a class of high-tech metals that originally emerged to suit the high operating temperatures of jet engines.

There are three main superalloy types:

Their use has extended into many other fields – and today, superalloys are used in all types of turbines, space vehicles, rocket engines, nuclear reactors, power plants, and chemical equipment.

The green economy runs on cobalt.

There are many types of lithium-ion batteries, but the vast majority of li-ions sold today use cobalt in some capacity.

In fact, by 2020 it is expected that 75% of lithium-ion batteries will contain cobalt. Why? It’s because cobalt is the most important metal for increasing the energy density of lithium-ion cathodes.

Green uses such as EVs are driving the upwards trajectory of cobalt demand.

By 202, almost 1/5 of cobalt demand will stem from electric vehicles.

Total refined cobalt demand:

Year Demand % xEV batteries % Electronics batteries
2010 64,000 <1% 30%
2015 95,000 6% 36%
2020e 124,000 17% 31%

Source: CRU

“Cobalt’s demand growth profile remains one of the best among industrial metals peers. Its exposure to rechargeable batteries continues to play a crucial role.” – Macquarie 

Getting cobalt is the hard part.

98% of cobalt is produced as a by-product of copper and nickel mines. The problem? If copper and nickel production isn’t growing, then more cobalt isn’t mined to meet demand. Why not find more cobalt?

It’s easier said than done. The vast majority of the world’s cobalt lies in risky regions like the DRC.

Country % Cobalt Supply in 2014
DRC 58%
Russia 6%
Cuba 5%
Australia 5%
Philippines 4%
Madagascar 4%
Other 19%

Source: CRU

Supply can tighten…

Chemical cobalt – the kind used in batteries, is expected to fall into a growing deficit over the next few years. By 2020, CRU expects that deficit to be at least 12,000 tonnes.

U.S. government definitely doesn’t have any strategic stockpiles.

According to the U.S Defense Logistics Agency, the government sold off cobalt all the way up until 2008. Now there is only 301 tonnes left in strategic stockpiles.

Cobalt was one of the best-performing metals in 2016.

Metal 2016 performance
Zinc 66%
Cobalt 47%
Nickel 17%
Aluminum 17%
Copper 17%
Silver 16%
Gold 9%
Platinum 1%
Uranium -42%

Cobalt prices have been rising, but they are nowhere near all-time highs yet.

All-time highs for cobalt prices happened in 2008, after the DRC government placed restrictions on export of ores and concentrates. For a brief stint, cobalt prices even exceeded $50/lb.

The current price? Roughly $16/lb.

Many experts predict the cobalt market to be interesting to watch in 2017:

“Just how much cobalt is in stockpiles in China is the Million Dollar Question. Clarity here can materially affect the cobalt price.” Chris Berry, House Mountain Partners, LLC

“The refined cobalt market will fall into a 3,000 tonne deficit this year following seven years of overcapacity and oversupply. CRU anticipates prices to increase onward into 2017…” – Edward Spencer, CRU Group

“With this growth will come further disruption to the traditional market structures that have developed in cobalt over the last 30 years. In short, a new, more secure supply chain for the modern era will need to be created, a task that includes new mines, new refineries, and a more transparent supply chain.” – Andrew Miller, Benchmark Minerals

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